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Unilateral Changes to Employment Agreements due to an Economic Crisis

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Unilateral Changes to Employment Agreements due to an Economic Crisis

As you know, Hurricane Irma caused a severe economic crisis. Employers have often asked us if they can legally reduce working hours, thereby (unilaterally) changing employment agreements, a solution that is assumed to be favorable above mass dismissal.

When discussing this subject, it must be kept in mind that an economic crisis is a problem for both employees and employers. The consequences should be divided between them as much as possible.

Because of past economic crises in The Netherlands, Dutch employers have struggled with similar problems and also tried to change employment agreements. The key points listed below are deduced from case-law and may be helpful to determine under what circumstances a request to change the employment agreement may be successful.

● Some changed circumstances are a risk of the employer, for instance when it is easy for the employer to insure this risk privately (2)
• The request to change the labor agreement has to be expressed clearly and must be sufficiently substantiated with financial data (3 and 7)
• The employer is also supposed to take other cost-saving measures, however a judge can only marginally test whether the measures taken are sufficient; the court is not allowed to sit in the entrepreneur's chair (8)
• The employer must also take into account the interests of each individual employee (5, 6 and 7)
• Approval from the Workers Council, the Labor Union, and/or a vast majority of the employees may strengthen the proposal of the employer (5, 6, 7 and 9)
• In order to implement changes, the employer has to inform the employee of the desired change(s) (7). The proposal of the employer must be reasonable, and include sufficient (financial) compensation (8)
• When assessing the reasonability of the employer's proposal, the judge should also take into account the benefits for the employees (8). For example:
o fewer working hours for the employees also results in more free time;
o a change may be brought in line with the CLA, which may also be considered to be in the interest of both the employers and the employees
• Employees may be asked to show some solidarity with other employees, particularly in situations where the alternative may be a mass dismissal, and an employer may be asked to take all possible efforts within reasonable limits to avoid compulsory redundancies (9).

In conclusion, there are many factors that must be taken into account and there is not one rule that applies to all situations. However, it seems clear from all the aforementioned cases that due diligence, reasonability, and fairness are key points here. If you have any questions, please don’t hesitate to contact me or my colleagues at BZSE Attorneys at Law.